AI policy's new power center

The Pentagon designated Anthropic as a "supply chain risk," requiring companies to stop using Claude AI in Defense Department-related cases, prompting Anthropic to sue on grounds the Pentagon violated its free speech rights and lacks congressional authority. At least 100 customers, from pharmaceutical to financial companies, have asked to pause or cancel their Anthropic contracts following the Pentagon's decision, according to Anthropic lawyer Michael Mongan. The Defense Department's move demonstrates how procurement decisions can reshape the AI industry, as it is the federal government's biggest tech buyer and its contract requirements often become de facto industry rules. A hearing on whether to grant Anthropic temporary relief is scheduled for March 24, with Microsoft also seeking a temporary restraining order. The Pentagon's designation of Anthropic as a supply chain risk is typically reserved for foreign adversaries and represents an unusual use of procurement power that could establish a new contract-by-contract approach to AI governance.